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    Erdal Saglam: Turkey considered as an economy to face recession

    Hürriyet Haber
    09.10.2008 - 11:18 | Son Güncelleme:

    I guess the politicians saying "we will stay be unharmed" and the bureaucrats that think their existence depends on “verbalizing comments the ruling Justice and Development would like to hear" at a time when the affects of the financial crisis are upon us, have fallen silent after the growth data released yesterday.

    Market sentiment was dampened by the release of yesterday’s growth data, as growth forecasts for 2008 and 2009 were cut.

     

    Turkey’s industrial output, considered as a very important signal of decrease for growth, posted a 4 percent decline for August. Growth forecasts for 2008 were cut to 2 percent from their previous estimates of 4 to 4.5 percent. What is more, the growth rate for 2009 is expected to be worse.

     

    The reports issued by a number of banks yesterday suggesting that "Turkey could also be among the countries which will face recession," could be seen both premature and an exaggeration at this point in time.

     

    Turkey’s current account deficit figures are also being revised down in line with the cuts in growth forecasts.

     

    Obviously, this lasting financial crisis and the rise in currency rates will put off any interest rate cuts. Some bank reports say that last month’s rise in currency rates would affect the year-end inflation by almost 1 percent. They also add that this can be balanced by declines in food and energy prices and that the year-end inflation does not need to be revised.

     

    The 4 percent fall in August's industrial output is also seen as very meaningful since it is reflected ahead of the recent financial turmoil and before its full impact is felt on the real economy.

     

    With the appearance of a number of pre-indicators, the suggestion of "a recession risk for Turkey" has started to be spoken.

     

    WILL GLOBAL RATE CUTS BE ENOUGH

    The U.S. Federal Reserve, European Central Bank, together with the Canadian and UK central banks yesterday decided on a coordinated interest rate cut and decreased interest rates by 50 basis points on pressure from the global financial markets.

     

    Do you think these interest rate cuts will be sufficient? We are passing through such a critical period that the markets maintain their serious concern over whether this radical decision would bring an end to the crisis.

     

    You may right in saying that what more can be done after so many measures have already been implemented to ease the crisis. And nobody knows at this point, but more decisions will need to be made and more actions will need to be taken.

     

    Market analysts say these measures should bring short term relief,  but they also add that "the issue needs to be approached more carefully since the problems in the financial sector have reached an unprecedented extent."

     

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